Millions of homes are worth less than the amount the homeowners owe on their home loan mortgage. In some instances these homeowners are unemployed or have reduced incomes. Any or all of these factors lead to non-payment of loans, default, and finally to loss of the homes by the homeowners via short sales, foreclosures or Deeds-in-lieu of foreclosures. Short sales and foreclosures, in turn, further harm the values of all homes in the areas involved, leading to even more homes being worth less than the mortgage loans. The result is increasing loss of loan principal and interest payments to the lenders in addition to increasing numbers of homeowners losing homes and credit score points.
These reductions in home values reduce the demand for and construction of new homes, which adversely affects the entire economy, along with disruption of people's lives and resulting misery, on top of that already caused by loss of homes and credit score reductions.